Iowa Faces $131 Million Budget Shortfall

March 14, 2017 By Shane Vander Hart

The March report of the Iowa Revenue Estimating Conference announced that their estimate of the State of Iowa’s General Fund receipts shows a $131 million budget shortfall with three months left in Fiscal Year 2017. In 2018 the estimated shortfall grows to $191 million.

The Iowa Legislature and Governor Terry Branstad had recently reapportioned the budget for FY 2017 making over $48 million in cuts when Senate File 130 passed and was signed.

The Governor’s office said further cuts were not planned for the current fiscal year.

“Our Iowa economy is growing. But the challenging farm economy, with commodity prices below the cost of production for far too long, has hit our state revenues. Iowa is prepared. The State of Iowa has hundreds of millions in the cash reserve account – the state’s savings account. Gov. Branstad and Lt. Gov. Reynolds propose using our savings in the cash reserves, rather than additional budget cuts, to meet our current fiscal year needs. The State has already made cuts to the current fiscal year budgets but with just over three months remaining in the current fiscal year, additional cuts are not feasible. The Governor and Lt. Governor are committed to reimbursing the cash reserve account in the budgets to be passed this legislative session,” Ben Hammes, communications director for the Branstad/Reynolds Administration, said in a released statement.

Iowa Senate Majority Leader Bill Dix (R-Shell Rock) also stated that further cuts will not be made this legislative session.

“We must not cripple our schools, public safety and many other essential services with further cuts this year. Our savings account exists for moments such as this,” Dix said.

“Refilling our savings account will be a top priority of Senate Republicans in our ongoing budgeting process. We must also remain steadfast in our efforts to examine all state government spending, to include tax credits and streamlining state government services, as we prepare Iowa to become more fiscally sound and responsible. This path will lead to predictability for taxpayers and growth in our economy which will create an environment for small businesses to invest and new career opportunities for all Iowans,” he added.

State Representative Pat Grassley (R-New Hartford), chair of the House Appropriations Committee, said the legislature must act to address this challenge.

“There is no time to waste. While a reduction in state revenue this far into the fiscal year is challenging, sound budgeting principles will allow House Republicans to craft a plan that keeps the budget balanced and Iowa moving forward,” Grassley said.

Grassley said that Iowans deserved more accurate estimates from the Revenue Estimating Conference. “We understand this is a difficult task that many states are struggling to deal with right now, but we need to find a way to better predict state revenue. Changes in how the state tracks and collects revenue need to be made to make estimates more reliable,” he said.

“A very hard look needs to be taken at the “what” and “where” taxpayer money is usedtomake sure Iowans are getting the best value and their priorities are being met. This very well could mean the state needs to curtail or end longstanding spending,” Grassley added.

He also noted that every tax credit has to be reevaluated.

“The news out of the Revenue Estimating Conference is troubling, but not surprising,” Senate President Jack Whitver (R-Ankeny) said. “For the past several years, we have consistently raised concerns with spending. We saw this coming. This is why Senate Republicans came into this session with a pro-growth agenda focused on creating an environment that will grow jobs and the economy.”

“We have passed several meaningful reforms this session and continue to work on other measures that will strengthen our economy by reducing burdensome regulations on our job creators. As we move forward with the FY 2018 budget, it is imperative we ensure our budget commitments are honored today and in the future through sound, fiscal discipline,” Whitver added.

Some called for tax and budget reforms.

“The report released by the Iowa Revenue Estimating Conference demonstrates the serious need for tax reform in Iowa. Years of bad tax policy have created an unstable state economy and left us with big budget problems,” Drew Klein, state director for Americans for Prosperity – Iowa, said in a released statement.

“Legislators should seek a long term solutions by rethinking the way our state does economic development and by enacting budget reform that will prevent these problems in the first place. Providing Iowa’s businesses and families with the tax relief they need is the best path forward for Iowa’s economy,” he added.

Democrats said that Republican policies are a train wreck for working families.

“In 2010, Governor Terry Branstad and Lt. Governor Kim Reynolds were elected to office based on two promises: Raise family incomes by 25% and create 200,000 new Iowa jobs within four years. They failed and made life worse for Iowa families and their communities,” State Senator Joe Bolkcom (D-Iowa City), the minority ranking member on the Senate Appropriations Committee, said in a released statement.

“Now, with complete control of the Iowa Statehouse, Republicans are pursuing an agenda that is driving down incomes and destroying jobs. Their agenda includes grossly underfunding our local schools; turning Iowa’s respected, state-run Medicaid safety net into a national disaster; weakening the rights of workers and driving down wages; and showering out-of-state corporations with an all-you-can-eat buffet of tax cuts and tax credits,” he added.

He said that Senate Democrats are ready to work with the Governor and legislative Republicans on plans to improve fiscal stability to the state budget “by investing in our schools and job-creation initiatives, and taking a serious look at out-of-control spending on tax credits.”

Grassley noted that the shortfall would have been worse if $1 Billion of additional spending over the last two years suggested by Democrats was not rejected by House and Senate Republicans.

Shane Vander Hart is the founder and editor-in-chief of Caffeinated Thoughts. He is also the President of 4:15 Communications, LLC, a social media & communications consulting/management firm. Prior to this Shane spent 20 years in youth ministry serving in church, parachurch, and school settings. He has also served as an interim pastor and is a sought after speaker and pulpit fill-in. Shane has been married to his wife Cheryl since 1993 and they have three kids. Shane and his family reside near Des Moines, IA.

About Shane Vander Hart

Shane Vander Hart is the founder and editor-in-chief of Caffeinated Thoughts. He is also the President of 4:15 Communications, LLC, a social media & communications consulting/management firm. Prior to this Shane spent 20 years in youth ministry serving in church, parachurch, and school settings. He has also served as an interim pastor and is a sought after speaker and pulpit fill-in. Shane has been married to his wife Cheryl since 1993 and they have three kids. Shane and his family reside near Des Moines, IA.